Consumer prices surged in 2022, and since then, necessities like food, housing, and energy have been hit with the highest increases. Housing costs have been a point of contention, as both renters and homeowners are battling an expensive and competitive market.
Many Americans feel priced out of the American homeownership dream, and now rental markets nationwide are becoming unaffordable.
While big cities are notorious for expensive rent, the cost of living in mid-sized cities and suburban areas has risen significantly over the past few years.
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Despite real wages rising across the board, many workers feel their paychecks don’t stretch as far as they once did. Balancing competing financial obligations like housing, student loans, building an emergency fund, and saving for retirement has become increasingly difficult for younger generations.
The salary needed to afford the average rent has been on the upswing for years, and now it far outpaces the average for U.S. workers.
The rental market may be a more attainable housing option for many Americans in 2025, but it still presents risks and financial hardship.
A couple celebrates the purchase of a new house. Many young Americans are choosing to stay in the rental market as they wait out high mortgage rates and increased competition.
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Americans can’t afford rent on the average U.S. salary
According to the most recent data from the Bureau of Labor Statistics, average hourly and weekly wages both increased between December 2023 and December 2024.
Median annual salaries in the U.S. were $61,984 in Q4 2024, up 4.1% from 2023. Wages have been outpacing inflation rates, yet more workers than ever indicate they are living paycheck to paycheck.
Prices have increased by 21.4% since February 2020, while income has grown by over 26%. Americans’ income is enough to offset the effects of inflation, yet there is an income gap between salary and rent.
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A recent Redfin report shows that renters make far less than the national average, earning $54,752 in 2024. While this marks a 5% increase from 2023, it is still almost $10,000 less than the salary needed to afford the typical rent in the U.S.
Almost half of U.S. households are cost-burdened, meaning they spend at least 30% of their income on housing, and a record number of homeowners and renters note they can’t afford their monthly housing costs.
However, there may be good news on the horizon for renters.
The most and least affordable cities for renters
Experts note that the income-rent gap is narrowing as wages rise and rents stabilize from post-covid markups.
Redfin Senior Economist Sheharyar Bokhar predicts that rent prices will stay flat this year, while salaries are expected to grow due to increased apartment construction. This will hopefully provide some relief to renters and make progress on improving housing affordability.
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Location plays a crucial role in both salary and housing costs, and experts note that the ideal metro areas for renters are those with high salaries but low rents. Austin, Houston, and Dallas are the top three cities in the U.S. for rental affordability, where salaries earned far outpace the average rent, allowing renters to live comfortably.
Austin ranked the highest among U.S. cities in terms of current income-rent ratios and had the biggest year-over-year improvement.
However, relative to income, Providence, R.I., Miami and New York City ranked as the top three least affordable cities for renters. New York is notably costly, with median salaries set at $71,376, while renters must make $112,000 annually to afford the median asking rent.
Though rents are expected to plateau this year, housing affordability varies based on city and state, meaning some renters may catch more of a break than others.
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